«GLOSSARY OF TERMS The following Glossary of Terms is not intended to be legal definitions, but rather a lay expression or explanation of how the ...»
LATENT DEFECT: A hidden structural defect that would not be discovered by ordinary inspection and that threatens the property's soundness or the safety of its inhabitants. Some states impose on sellers and licensees a duty to inspect for and disclose latent defects. Buyers have been able to either rescind the sales contract or receive damages when a seller fails to reveal known latent defects. The courts have also decided in favor of the buyer when the seller neglected to reveal violations of zoning or building codes.
LATERAL SUPPORT: The right to have land supported by the adjoining land or soil beneath.
LAW OF AGENCY: A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.
LEASE: An agreement, written or unwritten, transferring the right to exclusive possession and use of real estate for a definite period of time. To create a valid lease, the lessor must retain a reversionary right; that is, the lessor (landlord) must grant the right of possession to the lessee (tenant) but retain the right to retake possession after the lease term has expired.
MODIFIED NET –Each and every expense must be identified as to where the responsibility for payment lies. Taxes are always paid for by the tenant; all other expenses may be negotiated.
NET, NET, NET –(often referred to as triple net): The tenant is obligated to pay the following expenses attributable to the leased property, including but not limited to: 1) Taxes, 2) Insurance, and 3) Maintenance.
GROSS LEASE –Lessor pays base taxes and insurance and maintains the roof, exterior walls and structural members. Lessee pays increase in costs of taxes and insurance over base year and assumes responsibility for all other expenses.
Allard Commercial Brokerage –Glossary of Terms Page 45 of 45 MULTI-TENANT –The term multi-tenant preceding any of the above definitions qualifies each in that provisions are incorporated in each lease which address the common area expenses (CAM) and the administrative procedure for controlling same.
LEASE OPTION: A lease under which the tenant has the right to purchase the property, either during the lease term or at its end.
LEASE PURCHASE: The purchase of real property, the consummation of which is preceded by a lease, usually long-term. Typically done for tax or financing purposes.
LEASE RATE QUOTES: Usually stated in dollars per month (net or gross) or cents per square foot per month (net or gross) calculated on square footage of the building (exterior measurements).
LEGACY: A gift of personal property by will.
LEGAL DESCRIPTION: A proper and formal method of describing a parcel of real estate that is recognized by law.
LEGAL TITLE: Title that is complete and perfect regarding right of ownership; may be held by a trustee under a deed of trust.
LESSEE: The business entity to which property is rented or leased; also referred to as a tenant.
LESSOR: The business entity which rents or leases property to another; also referred to as a landlord.
LESS-THAN-FREEHOLD ESTATE: A leasehold estate, considered to exist for a definite period of time or successive periods of time until termination.
LETTER OF CREDIT: An instrument used for financial security instead of cash. Issued by a Financial institution.
LEVEL ROOF HEIGHT: Office, or room, and building roof at the same height.
LEVERAGE: Using someone else's money to purchase a property. Refers to the ability to use the investment as collateral for a loan.
LEVY: To assess, seize or collect. To levy a tax is to assess a property and set the rate of taxation. To levy and execution is to officially seize the property of a person in order to satisfy an obligation.
LICENSE: Permission given by the owner of property to enter the property for a particular purpose. A license is of temporary character, purely a personal right, and cannot be sold. It is usually revocable by the owner at any time.
LIEN: A charge or claim that one entity (lienor) has on the property of another (lienee) as a security for a debt or obligation.
Allard Commercial Brokerage –Glossary of Terms Page 46 of 46 LIFE ESTATE: Any estate in real or personal property that is limited in duration to the life of its owner of the life of some other designated person. Although classified as a freehold estate because it is a possessory estate of indefinite duration, a life estate is not an estate of inheritance.
LIFE SAFETY: Government regulations and building code requirements for building relative to seismic, fire, handicapped and existing requirements.
LIFE TENANT: A person in possession of a life estate.
LIFT TRUCK: Powered equipment that transports, lifts, and stacks pallets.
LIKE KIND: A term relating to the nature of a property rather than its quality or quantity. Only like kind properties qualify for a real estate exchange and the resulting tax benefit.
LIMITED LIABILITY COMPANY (LLC): LLCs are a relatively recent form of business organization. An LLC combines the most attractive features of limited partnerships and corporations. The members of an LLC enjoy the limited liability offered by a corporate form of ownership and the tax advantages of a partnership. In addition, the LLC offers flexible management structures without the complicated requirements of S corporations or the restrictions of limited partnerships.
LIMITED PARTNERSHIP: Consists of one or more general partners as well as limited partners.
The business is administered by the general partners and funded, for the most part, by limited or silent p r es T el tdp r e‟lbi il tdt tea at r. h i e at r i iysi e o h mount invested and in some cases n mi n sa l t mi the profit he can make. A limited partner is generally not permitted to have a voice in the management.
LINEAR FOOT: A measurement meaning one foot or 12 inches in length as contrasted to a square foot or a cubic foot.
LINTEL: The part over a door or other opening that supports weight above.
LIQUIDATE: To convert property and/or other assets into money; to pay a debt in full.
LIQUIDATED DAMAGES: An amount predetermined by the parties to an agreement as the total amount of compensation an injured party should receive if the other party breaches a specified part of the contract.
LIQUEFACTION: A phenomenon during an earthquake whereby the ground/soil turns into a high unstable, jelly-like substance.
LIQUIDITY: The time it takes to convert an asset to cash as a reflection of its market value.
LIS PENDENS: A recorded legal document that gives constructive notice that an action affecting a particular piece of property has been filed in a state or federal court. Lis pendens is Latin for
LISTING AGREEMENT: A written employment agreement between a property owner (as principal) and a real estate broker (as agent) authorizing the broker to find a buyer or a tenant for certain real property, for which service the property owner agrees to pay the real estate broker a commission. Listing can take the form of open listings, exclusive agency listings, or exclusive right to sell or lease listings. The most common for is the exclusive right to sell or lease listing.
(see Open Listing, Exclusive Agency and Exclusive Right to Sell or Lease).
LITTORAL: Land bordering a pond, lake, ocean or sea-as opposed to land bordering a stream or river (running water).
LITTORAL RIGHTS: The rights of a landowner whose land borders a pond, lake or ocean shoreline where the body of water is non-flowing. Littoral rights extend to the mean high water mark of ocean or tidal waters. (See riparian rights, water rights.) LIVE LOAD: The variable weight per square foot to which a building is subject. It is a load that may be removed or replaced on a structure but which is not necessarily a dynamic load. It includes the impact effect, such as people walking on a surface.
LIVING TRUST: An arrangement in which a property owner (trustor) transfers assets to a trustee who assumes specified duties in managing the asset. After payment of operating expenses and trustee's fees, the income generated by the trust property is paid to or used for the benefit of the designated beneficiary.
LOAD FACTOR/COMMON AREA ALLOCATION (office): That percentage of the building, which is common area, allocated to the tenants to increase their usable area to rentable area. A load factor of 10% means that 900 usable square feet would be 990 rentable square feet.
LOADING DOCK: A platform or area where material, equipment, supplies, etc., are moved in or out of an industrial facility to trucks or rail cars.
LOAN APPLICATION: A lender's initial source of information on a borrower/applicant and the collateral involved; stipulates the amount of money requested and repayment terms.
LOAN COMMITMENT: A written statement from the lender, in response to a formal executed loan application, agreeing to lend a specific sum of money for a specified purpose over a specific term at a specified rate of interest. To be valid, a real estate loan commitment must state: (1) amount, (2) term, (3) interest rate, (4) fees, if any, (5) conditions and requirements for funding, and (6) real property to be taken as security, and must be in writing.
LOAN CONSTANT: The percentage of the unpaid balance of a loan which is represented by the sum of the principle and interest payments for the following year which is needed to fully amortize the loan. For example, a six percent loan amortized over 25 years has a loan constant of 7.732 percent. Annual payments necessary to fully amortize a $100,000 loan in 25 years would therefore be $7,732 per year.
Allard Commercial Brokerage –Glossary of Terms Page 48 of 48 LOAN ORIGINATION FEE: The processing of a mortgage application is known as loan origination. When a mortgage loan is originated, a loan origination fee, or transfer fee, is charged by most lenders to cover the expenses involved in generating the loan. These include the loan officer's salary, paperwork and the lender's other costs of doing business.
LOAN PACKAGE: A collection of papers and documents relative to a specific property on which a lender will base a decision to approve or decline a loan request. A typical loan package will generally include the following: (a) Letter of Transmittal, (b) Executed Loan Application, (c) Appraisal, (d) Financial Statements, (e) Credit Reports and/or Dun and Bradstreet Reports, (f) Photographs, (g) Plot Plan and Survey, (h) Cost Breakdown, (i) Complete Set of Plans and Specifications for proposed projects, (j) Other items which would assist a lender in making his/her decision.
LOAN QUOTE: The best estimate of a lender, mortgage banker or mortgage broker of a loan which could be obtained on a specific property under the conditions stated by the person requesting the quote. A quote is normally issued before the property to be taken as security for the loan has been appraised, or the financial capacity of the proposed borrower analyzed, by the mortgage banker or lender and should be accepted in that light –as an estimate of the loan obtainable and not as a promise of that exact loan amount.
LOAN SERVICING: The procedure, by a servicing agent of processing all the details of loan administration, including, but not limited to: (1) Consolidation of all loan payments received for each lender into one or two large checks each month, (2) Providing each lender with an accurate accounting of the funds received for its account, (3) Posting of individual payments received to the records of each borrower, (4) Ensuring that taxes are paid on time and that proper insurance is kept in force on all properties hypothecated to lenders as security for their loans, (5) Inspections of properties, as required by lenders, (6) Disbursement of any repair funds (usually insurance proceeds) i tec s o d ma et po et s e ui l d r l n (e,i,l d n h a e f a g o rp re s c r g e e‟ o s i.fe f o, i n n sa. r o earthquake damage, etc.) LOAN-TO-VALUE RATIO: The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.
LOCAL PANEL: The switch panel controlling lighting in a section of a building.
LOCAL TRANSFORMER: The transformer in a 480- or 220-volt system that reduces voltage to 22 or 100, as applicable.
LOCKED IN LOAN: A loan that the borrower is forbidden by contractual agreement from paying off before a certain period of time has elapsed.
LOYALTY: The duty of loyalty requires the agent to place the principal's interests above those of all others, including the agent's own self-interest. The agent must be particularly sensitive to any Allard Commercial Brokerage –Glossary of Terms Page 49 of 49 possible conflicts of interest. Confidentiality about the principal's personal affairs is a key element of loyalty.
MAIN DISTRIBUTION PANEL: The switching panel controlling feeder electric cables in a building.
MAIN LINE (MAIN TRACK): A primary main line track handles high-speed traffic and heavy tonnage; a secondary main line handles less traffic; a branch main line handles still less traffic.
Main lines run through yards and between stations and are regulated by signals.
MAKER: The borrower who executes a promissory note and becomes primarily liable for payment to the lender.
MARGIN: In an adjustable-rate loan, the amount added to the index rate that represents the lender's cost of doing business (including costs, profits and risk of loss of the loan). Generally the margin stays constant during the life of the loan.
MARKET DATA APPROACH: The process of estimating the value of property through the examination and comparison of actual sales of comparable properties.